1) Assume a DVC has a real per capita output of $1,000 as compared to $20,000 for an
IAC. If both nations realize a 4 percent growth of their real per capita outputs, after one
year the absolute real per capita output gap will:
A.remain unchanged at $19,000.
B.increase by $760.
C.decrease by $1,000.
D.increase by $19,760.
2) (Consider This) The prisoner’s dilemma is generally demonstrated through:
A.the kinked-demand model.
B.game theory.
C.monopolistic competition.
D.a tightly knit cartel.
3) An exclusive legal right as sole producer for 20 years granted to an inventor of a
product is called a:
A.Copyright
B.Franchise
C.Patent
D.License
4) Below are five statements. Indicate which type of cognitive bias is present in each
situation.
(a)Mark, a financial advisor, suggested many clients purchase stock in a new
technology company. When the stock price fell dramatically, Mark proclaimed he saw
the fall coming.
(b)Kelly begins buying lottery tickets at a local convenience store that recently sold a
million-dollar ticket.
(c)Suzie failed her mathematics exam. Despite the fact that she was unprepared for the
exam, she blamed the instructor.
(d)Jim, the new CEO of Business X, has made a string of bad decisions over the past
several quarters. He continues to ignore the advice of others on the board and bases his
decisions on his judgments.
(e)Nancy tells her boss that she will be finished with a work project by the end of the
day. She works until midnight to finish the project on time.
5) As output increases, average fixed costs:
A.Increase
B.Decrease
C.Remain constant
D.First increase and then decrease
6) According to demographers. The “demographic transition” resulting from an increase
in living standards follows a pattern of:
A.Death rates falling ahead of a decline in birth rates
B.Death rates falling after birth rates fall
C.Death rates rising as birth rates fall
D.Death rates rising as birth rates rise
7)
Refer to the diagram. If actual production and consumption occur at Q1:
A.efficiency is achieved.
B.consumer surplus is maximized.
C.an efficiency loss (or deadweight loss) of b + d occurs.
D.an efficiency loss (or deadweight loss) of e + d occurs.
8) Suppose a firm in a purely competitive market discovers that the price of its product
is above its minimum AVC point but everywhere below ATC. Given this, the firm:
A.minimizes losses by producing at the minimum point of its AVC curve.
B.maximizes profits by producing where MR = ATC.
C.should close down immediately.
D.should continue producing in the short run but leave the industry in the long run if the
situation persists.
9) Suppose Aiyanna’s Pizzeria currently faces a linear demand curve and is charging a
very high price per pizza and doing very little business. Aiyanna now decides to lower
pizza prices by 5 percent per week for an indefinite period of time. We can expect that
each successive week:
A.demand will become more price elastic.
B.price elasticity of demand will not change as price is lowered.
C.demand will become less price elastic.
D.the elasticity of supply will increase.
10) Creative destruction is:
A.the process by which large firms buy up small firms.
B.the process by which new firms and new products replace existing dominant firms
and products.
C.a term coined many years ago by Adam Smith.
D.applicable to planned economies but not to market economies.
11) A market where there is only a single buyer is called a(n):
A.Monopoly
B.Monopsony
C.Oligopoly
D.Dominant firm
12) For which one of the following goods would we need to sum individual demand
curves vertically to obtain the total demand curve?
A.Frozen yogurt.
B.Bubble gum.
C.Microwave popcorn.
D.Courts of law.
13) Compared to the purely competitive industry, a pure monopoly:
A.Is able to use barriers to entry and maintain positive economic profits in the long run
B.Produces an equal amount of output, but charges higher prices to cover all costs in
the market
C.Is often more efficient from society’s perspective because it has big plants and it uses
the newest technology
D.Will always become competitive in the long run because positive economic profits
will induce competitors into the market
14) Credit card companies put a low “minimum required payment” on people’s bills in
the hope that people will send in low payments thereby allowing the card companies to
earn more interest. The companies are trying to exploit the:
A.Framing effect
B.Anchoring effect
C.Confirmation bias
D.Endowment effect
15) Most of the technological advances in U.S. agriculture are initiated by the
following, except:
A.Government-sponsored agencies
B.Farmers
C.Colleges and universities
D.Suppliers of farm inputs
16) The information-aggregation problem faced by the top layers of government can
make it hard for the high-level officials to:
A.Discern the prices of specific goods and services in the economy
B.Comprehensively assess the marginal costs and benefits of specific programs
C.Monitor the incomes of individual firms and households
D.Estimate the total amount of spending incurred by the government
17) Which of the following terms implies the least degree of confidence in an economic
generalization?
A.Hypothesis.
B.Theory.
C.Principle.
D.Law.
18) A tariff is a:
A.Tax
B.Price ceiling
C.Quantity limit
D.Subsidy
19) Common arguments often raised to present the case for protectionism include the
following, except:
A.Protecting infant industries until they mature
B.Protection against foreign suppliers’ dumping
C.Raising domestic employment in specific industries
D.Reducing the price of the product to consumers